Narrative and Numbers

Stories not only help us connect with others but, as research indicates, they are far more likely to be remembered than numbers, perhaps because they trigger chemical reactions and electrical impulses that numbers do not.

Stories not only help us connect with others but, as research indicates, they are far more likely to be remembered than numbers, perhaps because they trigger chemical reactions and electrical impulses that numbers do not. Stories create connections. They appeal to our emotions and make information more memorable. Research shows that stories trigger the release of oxytocin, a neurochemical associated with trust and caring, which can lead to changes in behavior. Additionally, stories can cause the brain waves of the storyteller and listeners to synchronize, enhancing communication effectiveness. Numbers provide precision and objectivity. They offer a sense of control and can be used to counterbalance the potential biases in storytelling. However, numbers can also be manipulated and misinterpreted, leading to false precision or objectivity. The key is to use both stories and numbers in valuation: Stories provide context, vision, and emotional engagement Numbers offer measurable metrics, data-driven insights, and analytical rigor The combination of both creates a more comprehensive and persuasive valuation

A good business story is simple, credible, and persuasive. Telling one, though, requires that you understand both the business and the market in which it operates. Simplicity is key. A good business narrative should have a clear, concise core message that is easy to understand and remember. Avoid unnecessary complexities or distractions that might detract from the main point. Credibility is crucial. The story must be grounded in reality and supported by facts, data, and logical reasoning. It should acknowledge limitations while highlighting strengths and potential. Actionability drives results. A compelling narrative should inspire action, whether it's from investors, customers, or employees. It should clearly communicate: The problem or opportunity the business addresses How the business solves the problem or capitalizes on the opportunity The potential impact and value creation To craft an effective narrative, thoroughly research and understand: The company's history, operations, and unique value proposition The market landscape, including competitors and industry trends The target audience and their specific interests or concerns

Not everything that is possible is plausible and many stories that pass the plausibility test flounder when put to the probability test. The three Ps of narrative testing: Possibility: Is the story theoretically achievable? Plausibility: Is there evidence to support that it can happen? Probability: How likely is it to occur? This framework helps evaluate the strength and credibility of a business narrative. As you move from possibility to probability, the level of scrutiny increases: Possible narratives: These are the most inclusive but least reliable for valuation purposes. They…